/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/050711.mbx T R O U B L E D C O M P A N Y R E P O R T E R L A T I N A M E R I C A Monday, July 11, 2005, Vol. 6, Issue 135 Headlines A R G E N T I N A ALIMENTOS FARGO: Releases Details of ARS523.2 Mln Debt Proposal DROGUERIA LUVI: Seeks Court Approval to Reorganize EQUITRON S.R.L.: Bankruptcy Initiated Following Court Ruling EXEMPLA COMPANIA: Asset Liquidation Required to Pay Debts LA FRAGUA: Court Rules for Liquidation LE TECHNICE: Enters Bankruptcy on Court Orders LOUCEN INTERNATIONAL: Debt Payments Halted, Set To Reorganize NOUVEAU AUCTION: Files for Bankruptcy SAN JOSE: Bankruptcy Ruling Requires Liquidation TECNOFAR S.A.: Liquidates Assets to Pay Debts TER SERVICE: Declared Bankrupt by Court OSTRILION S.A.C.E.I.: Finalizes Reorganization * ARGENTINA: Credit Upgrade Unlikely; Uncertainty Persists * FORMOSA: Moody's Moves Rating (National Scale) to D.ar B R A Z I L BANDEIRANTE ENERGIA: Moody's Withdraws Ratings CORSAN: Moody's Withdraws Ratings Following Full Debt Repayment KLABIN: Goiana Project Finalized, Status Updated UNIBANCO: Board Sets July 15 Meeting; Announces Agenda USIMINAS: Moody's Places Ratings on Review for Possible Upgrade C O S T A R I C A ICE: Sacks Director for Alleged Irregularities E C U A D O R PACIFICTEL: Chairman Quits Post PETROECUADOR: President Recommends Restructuring PETROECUADOR: President Denies Alleged State Indebtedness H O N D U R A S * HONDURAS: WB Approves $97M Loan For Poverty Reduction J A M A I C A AIR JAMAICA: Government, Opposition Compromise to Save Airline M E X I C O INNOVA: Moody's Upgrades Corporate Family Rating to Ba3 from B2 T R I N I D A D & T O B A G O BWIA: Prime Minister Discusses Murky Outlook - - - - - - - - - - ================= A R G E N T I N A ================= ALIMENTOS FARGO: Releases Details of ARS523.2 Mln Debt Proposal --------------------------------------------------------------- Compania de Alimentos Fargo SA, the country's leading maker of packaged bread, presented Thursday a long-awaited proposal to restructure ARS523.2 million in debt, reports Dow Jones Newswires. In a statement to the local stock exchange, Fargo disclosed it has ARS96.5 million in privileged debt and ARS410.7 million in non-privileged debt (US$ 1 = ARS2.90). Before paying these two groups, Fargo will first pay the ARS16 million in "bankruptcy expenses" in two annual installments beginning in December 2005. The national tax agency, AFIP, which holds ARS3.9 million in privileged debt, will receive the first of eight annual payments starting in December 2005, with no grace period. Bismark Acquisition LLC, which holds US$31.7 million (ARS91.93 million) in privileged debt, will be paid back in annual installments over eight years, with a one-year grace period, beginning December 2006. The remaining privileged debt, totaling ARS668,369, will follow the same payment plan as Bismark's. Among non-privileged debt, Fargo has US$134.9 million (ARS391.1 million) in bonds to restructure. The Company is proposing to exchange those obligations for peso-denominated notes totaling ARS391.1 million, with the maturity stretched to 2037 and a grace period of seven years. The new bonds will not pay interest. Principal payments begin in 2012. Fargo said it owes a further $810,451 (ARS2.35 million) and ARS17.2 million in non-privileged debt. Repayments on these obligations will also be done over a period of 32 years with seven years of grace. Installments begin in 2012 and do not pay interest. The Company released the details of the debt proposal around the same time it was starting a meeting with creditors in Buenos Aires. Fargo's first round of negotiations failed to produce results last year. Earlier this year, company executives restarted talks with the main creditors with the backing of Mexican baked-goods company Grupo Bimbo, which holds a 30% stake in the consortium that owns Fargo. To see a copy of Fargo's statement to the Comision Nacional de Valores, http://bankrupt.com/misc/CNV_Statement.pdf DROGUERIA LUVI: Seeks Court Approval to Reorganize -------------------------------------------------- Drogueria Luvi S.A., a company operating in Buenos Aires, has requested for reorganization after failing to pay its liabilities, Infobae reports. The reorganization petition, once approved by the court, will allow the Company to negotiate a settlement with its creditors in order to avoid a straight liquidation. The case is pending before Court No. 1 of the city's civil and commercial tribunal. Clerk No. 2 assists on this case. CONTACT: Drogueria Luvi S.A. Vieytes 1257 Buenos Aires EQUITRON S.R.L.: Bankruptcy Initiated Following Court Ruling ------------------------------------------------------------ Equitron S.R.L. enters bankruptcy protection after Court No. 26 of Buenos Aires' civil and commercial tribunal, with the assistance of Clerk No. 51, ordered the Company's liquidation. The order effectively transfers control of the Company's assets to a court-appointed trustee who will supervise the liquidation proceedings. Infobae reports that the court selected Adalberto Abel Corbelleri as trustee. Mr. Corbelleri will be verifying creditors' proofs of claim until the end of the verification phase on Sep. 9, 2005. Argentine bankruptcy law requires the trustee to provide the court with individual reports on the forwarded claims and a general report containing an audit of the Company's accounting and business records. The individual reports will be submitted on Oct. 24, 2005 followed by the general report, which is due on Dec. 5, 2005. CONTACT: Equitron S.R.L. Avda Triunvirato 5657 Buenos Aires Mr. Adalberto Abel Corbelleri, Trustee Carabobo 237 Buenos Aires EXEMPLA COMPANIA: Asset Liquidation Required to Pay Debts --------------------------------------------------------- Buenos Aires-based Exempla Compaia Argentina de Servicios S.R.L. will begin liquidating its assets following the pronouncement of the city's civil and commercial Court No. 17 that the Company is bankrupt, reports Infobae. The bankruptcy ruling places the Company under the supervision of court-appointed trustee, Angel Vello Vazquez. The trustee will verify creditors' proofs of claim until Aug. 16, 2005. The validated claims will be presented in court as individual reports on Sep. 28, 2005. Ms. Vazquez will also submit a general report, containing a summary of the Company's financial status as well as relevant events pertaining to the bankruptcy, on Nov. 10, 2005. The bankruptcy process will end with the disposal of the Company's assets in favor of its creditors. CONTACT: Exempla Compania Argentina de Servicios S.R.L. Tronador 230 Buenos Aires Ms. Angel Vello Vazquez, Trustee Parana 275 Buenos Aires LA FRAGUA: Court Rules for Liquidation -------------------------------------- Court No. 25 of Buenos Aires' civil and commercial tribunal ordered the liquidation of La Fragua S.R.L. after the Company defaulted on its obligations, Infobae reveals. The liquidation pronouncement will effectively place the Company's affairs as well as its assets under the control of Hector A. Franco, the court-appointed trustee. Mr. Franco will verify creditors' proofs of claim until Sep. 1, 2005. The verified claims will serve as basis for the individual reports to be submitted in court on Oct. 14, 2005. The submission of the general report follows on Nov. 25, 2005. Clerk No. 49 assists the court on this case, which will end with the disposal of the Company's assets in favor of its creditors. CONTACT: Mr. Hector A. Franco, Trustee Chacabuco 178 Buenos Aires LE TECHNICE: Enters Bankruptcy on Court Orders ---------------------------------------------- Buenos Aires' civil and commercial Court No. 7 declared Le Technice S.A. bankrupt after the Company defaulted on its debt payments. The bankruptcy order effectively places the Company's affairs as well as its assets under the control of a court- appointed trustee. The trustee is tasked with verifying the authenticity of claims presented by the Company's creditors. Following claims verification, the trustee will submit the individual reports based on the forwarded claims for final approval by the court on Sep. 13, 2005. A general report will also be submitted on Oct. 26, 2005. Infobae reports that Clerk No. 13 assists the court on this case, which will end with the disposal of the Company's assets in favor of its creditors. LOUCEN INTERNATIONAL: Debt Payments Halted, Set To Reorganize ------------------------------------------------------------- Court No. 16 of Buenos Aires' civil and commercial tribunal is reviewing the merits of Loucen International S.A. petition to reorganize. Infobae indicates that the Company filed the petition following cessation of debt payments. Reorganization will allow Loucen International S.A. to avoid bankruptcy by negotiating a settlement with its creditors. Clerk No. 32 is assisting the court on the Company's case. CONTACT: Loucen International S.A. Paraguay 647 Buenos Aires NOUVEAU AUCTION: Files for Bankruptcy ------------------------------------- Buenos Aires' civil and commercial Court No. 20 is currently reviewing the merits of the bankruptcy petition filed by Nouveau Auction International S.A. Infobae reports that the Company filed the request after defaulting on its debt payments. Clerk No. 40 assists the court on this case. CONTACT: Nouveau Auction International S.A. Tucuman 540 Buenos Aires SAN JOSE: Bankruptcy Ruling Requires Liquidation ------------------------------------------------ San Jose Parking S.A. of Buenos Aires will begin liquidating its assets after Court No. 7 of the city's civil and commercial tribunal declared the Company bankrupt. Infobae reveals that the bankruptcy process will commence under the supervision of court- appointed trustee, Jorge Edmundo Sahade. The trustee will review claims forwarded by the Company's creditors until Sep. 9, 2005. After claims verification, Mr. Sahade will submit the individual reports for court approval on Oct. 24, 2005. The general report will follow on Dec. 5, 2005. Clerk No. 13 assists the court on this case. CONTACT: Mr. Jorge Edmundo Sahade, Trustee Avda. de Mayo 1324 Buenos Aires TECNOFAR S.A.: Liquidates Assets to Pay Debts --------------------------------------------- Tecnofar S.A. will begin liquidating its assets following the pronouncement of the city's civil and commercial Court No. 23 that the Company is bankrupt, Infobae reports. The bankruptcy ruling places the Company under the supervision of court-appointed trustee, Luis Hugo Di Cesare. The trustee will verify creditors' proofs of claim until Aug. 25, 2005. The validated claims will be presented in court as individual reports on Oct. 11, 2005. Mr. Di Cesare will also submit a general report, containing a summary of the Company's financial status as well as relevant events pertaining to the bankruptcy, Nov. 23, 2005. The bankruptcy process will end with the disposal of the Company's assets in favor of its creditors. CONTACT: Tecnofar S.A. Viamonte 1465 Buenos Aires Mr. Luis Hugo Di Cesare, Trustee Viamonte 1336 Buenos Aires TER SERVICE: Declared Bankrupt by Court --------------------------------------- Ter Service S.R.L. is now "Quiebra" - meaning bankrupt, says Infobae. Buenos Aires' civil and commercial Court No. 13 decreed the Company's bankruptcy and appointed Flora Marcela Pazos, as receiver for the Company. Ms. Pazos will be reviewing creditors' claims until Sep. 2, 2005. Analyzing these claims is important because the outcome of the process will determine the amount each creditor will get after all the assets of the Company are liquidated. The court, which is aided by Clerk No. 25, will conclude the bankruptcy process by liquidating its assets to repay creditors. CONTACT: Ms. Flora Marcela Pazos, Trustee Montevideo 527 Buenos Aires OSTRILION S.A.C.E.I.: Finalizes Reorganization ---------------------------------------------- The reorganization of Ostrilion S.A.C.E.I. has been concluded. Data revealed by Infobae on its Web site indicated that the process was concluded after the Buenos Aires' civil and commercial Court No. 10, with assistance from Clerk No. 19, homologated the debt agreement signed between the Company and its creditors. CONTACT: Ostrilion S.A.C.E.I. Buenos Aires * ARGENTINA: Credit Upgrade Unlikely; Uncertainty Persists ---------------------------------------------------------- Moody's Investors Service is unlikely to upgrade Argentina's credit rating, which is now six levels below investment grade, in the next two years due to concern about sustained economic growth and the country's debt burden, reports Bloomberg. "At this moment, the probability of an improvement to the country's B3 rating is low. There is a lot of uncertainty," said Mauro Leos, a vice president and senior credit officer at Moody's. "Argentina continues to have an economy with a high debt load and the big question is if what we have seen up to now is a sign of what is to come," Mr. Leos added. * FORMOSA: Moody's Moves Rating (National Scale) to D.ar -------------------------------------------------------- Moody's Latin America S.A changed to D.ar from Ca.ar (Argentina National Scale) the rating assigned to the Province of Formosa's Co--participation Tax Revenue Secured Notes initially denominated in dollars and "pesified" in February 2002. These bonds remain in default. The Ca (Global Scale) rating is unchanged and the rating outlook is stable. =========== B R A Z I L =========== BANDEIRANTE ENERGIA: Moody's Withdraws Ratings ---------------------------------------------- Moody's Investors Service has withdrawn the Ba3 Global Local Currency and A3.br Brazilian National Scale Senior Unsecured Issuer Ratings of Bandeirante Energia S.A.. The ratings have been withdrawn for business reasons. Bandeirante Energia S.A. is an electricity distribution utility with 1.3 million customers and operating in the eastern portion of the state of Sao Paulo, Brazil. CORSAN: Moody's Withdraws Ratings Following Full Debt Repayment --------------------------------------------------------------- Moody's Investors Service has withdrawn the B2 Global Local Currency and Ba2.br Brazilian National Scale Senior Unsecured Issuer Ratings of Companhia Riograndense de Saneamento - CORSAN. The ratings have been withdrawn as the company's debt rated by Moody's was fully repaid upon maturity. Companhia Riograndense de Saneamento - CORSAN provides water and wastewater services to a population of over 6.5 million residing in the State of Rio Grande do Sul. The company serves 69% of the municipalities in Rio Grande do Sul under long-term concession agreements. The company's voting shares are 99.99% held by the State of Rio Grande do Sul. KLABIN: Goiana Project Finalized, Status Updated ------------------------------------------------ Klabin has completed the project to refurbish and expand the capacity of its packaging unit in Goiana (PE) after one year of implementation. The unity, which produces corrugated boxes to several segments, has gone through a number of repairs additionally to the purchase of new equipment. Among its results the project expanded by 30% of the unit production capacity, which now totals 5 thousand tons per month. Investments for project implementation were R$30 million. According to Klabin business director for Packaging Carlos Alberto Masili, the main goal of those investments is to serve more effectively customers from the Northeast region of the country. The unity serves the fruit, food, hygiene and cleaning and beverage markets. "Those segments show an increasing growth in the northeastern states and Klabin is able to follow this trend," says Masili. "For such, we combined innovation and high technology in the development of our products, creating tailor- made solutions that serve each customer's specific needs," he adds. Among other developments, the project included the building of a new reel warehouse, the installation of a new corrugator machine and the purchase of new types of printers. According to unit's manager Antonio Jos� Belo, the works aimed primarily at eliminating obstruction, which reflected directly on unit effectiveness, final product quality and customer service. "These changes increased even more the unit technological level", he explains. Klabin has sales offices in Recife (Pe), Petrolina (PE) and Fortaleza (CE) to provide better service to customers of several states of the region, such as Rio Grande do Norte, Paraiba and Ceara. Goiana refurbishing and expansion project confirms the Klabin commitment to the development of the areas where it operates. "We are constantly investing on personnel training and income generation to those towns without neglecting the principles of sustainable development that direct the company's actions," explains Klabin's CEO Miguel Sampol. Sampol also emphasizes that the company continually invests on research in order to add more value to its costumers' businesses - 20% of which is exports - in both domestic and foreign markets. Distribution Center Klabin has recently opened its Petrolina (PE) service unit aiming at improving the supply of packaging for agricultural products in the Northeast. The goal was to create an advanced center of operational support intended to the sale of generic packages to small and medium-sized markets, and to provide assistance to its partners' in the event of urgent requests, besides operating as a closed warehouse to future deliveries. The center is supplied by Klabin unities of Feira de Santana (BA) and Goiana. CONTACT: Klabin S.A. Mr. Ronald Seckelmann CFO and IR Director Mr. Luiz Marciano Candalaft IR Manager Phone: (5511) 3046-5847 E-mail: marciano@klabin.com.br Mr. Gustavo Vittorazze Schroden IR Analyst Phone: (5511) 3046-5934 E-mail: gvschroden@klabin.com.br UNIBANCO: Board Sets July 15 Meeting; Announces Agenda ------------------------------------------------------ The Board of Officers of Unibanco - Uniao de Bancos Brasileiros S.A. and of Unibanco Holdings S.A. intend to hold a meeting on July 15, 2005 with their respective Boards of Directors for the proposals for the payment of interest on capital stock. PROPOSALS FOR THE PAYMENT OF INTEREST ON CAPITAL STOCK A) The Board of Officers of UNIBANCO - Uniao de Bancos Brasileiros S.A. ("Unibanco") and of UNIBANCO HOLDINGS S.A. ("Unibanco Holdings") have decided to propose to their respective Boards of Directors to hold meetings on July 15, 2005 in order to discuss: I. The payment, only to the shareholders of Unibanco Holdings, of interest on capital stock, qualified as complementary to the interest on capital paid related to the profit ascertained in the 2004 fiscal year, in the gross amount of R$2.8 million and total net amount of R$2.4 million, to be made on July 29, 2005. This payment shall be considered as part of the mandatory dividend corresponding to the fiscal year of 2004, in accordance with the provisions of article 9th of Federal Law 9,249/95 and Article 35, sole paragraph, of the By-laws of Unibanco Holdings. Should the proposal described herein be approved, the shareholders of Unibanco Holdings shall have the right to receive the interest on capital stock in accordance with the gross and net amounts set forth in the table below. Such values correspond to one (1) share, one (1) Share Deposit Certificate ("Unit")*, or one (1) Global Depositary Share ("GDS")**, as the case may be. An income tax rate of fifteen percent (15%) will be withheld from such gross amounts, resulting in the net values set forth below: In R$ HOL-ON HOL-PN UNIT GDS UBHD3 UBHD6 UBBR11 NYSE- UBB Gross Value 0.0033367 0.0033367 0.0033367 0.0166835 Net Value 0.0028361 0.0028361 0.0028361 0.0141805 (*) Each UNIT represents one preferred share of Unibanco and one preferred share of Unibanco Holdings. (**)Each GDS listed on the New York Stock Exchange (NYSE: UBB) is equivalent to 5 Units. II. The payment of Quarterly Interests, related to the second quarter of 2005, in the gross total amounts of R$56.7 million and R$28.0 million, and net total amount of R$48.2 million and R$23.8 million, respectively to Unibanco and Unibanco Holdings, to be made on July 29, 2005. This payment shall be considered as part of the mandatory dividend corresponding to the fiscal year of 2005, in accordance with the provisions of article 9th of Federal Law 9,249/95, Article 44, paragraph 8th of the By-laws of Unibanco and Article 35, sole paragraph, of the By-laws of Unibanco Holdings. Should the Quarterly Interests proposals described herein be approved by the respective Board of Officers, the shareholders of Unibanco and/or Unibanco Holdings shall have the right to receive interest on capital stock in accordance with the gross and net amounts set forth in the table below. Such values correspond to one (1) share, one (1) Unit, or one (1) GDS, as the case may be. An income tax rate of fifteen percent (15%) will be withheld from such gross amounts, resulting in the net values set forth below: In R$ UBB-ON UBB-PN HOL-ON HOL-PN UNIT GDS UBBR3 UBBR4 UBHD3 UBHD6 UBBR11 NYSE-UBB Gross Value 0.0388235 0.0427059 0.0337633 0.0337633 0.0764692 0.3823460 Net Value 0.0330000 0.0363000 0.0286988 0.0286988 0.0649988 0.3249940 III. The payment of interest on capital stock, qualified as complementary to the interest on capital paid related to the profit ascertained in the first semester of 2005, in the total gross amount of R$219.1 million and R$104.2 million, and total net amount of R$186.2 and R$88.5 million, respectively to Unibanco and Unibanco Holdings, to be made on July 29, 2005. This payment shall be considered as part of the mandatory dividend corresponding to the fiscal year of 2005, in accordance with the provisions of article 9th of Federal Law 9,249/95, Article 44, paragraph 8th , of the By-laws of Unibanco and Article 35, sole paragraph, of the By-laws of Unibanco Holdings. Should the proposals described herein be approved, the shareholders of Unibanco and Unibanco Holdings shall have the right to receive the interest on capital stock in accordance with the gross and net amounts set forth in the table below. Such values correspond to one (1) share, one (1) Unit, or one (1) GDS, as the case may be. An income tax rate of fifteen percent (15%) will be withheld from such gross amounts, resulting in the net values set forth below: In R$ UBB-ON UBB-PN HOL-ON HOL-PN UNIT GDS UBBR3 UBBR4 UBHD3 UBHD6 UBBR11 NYSE-UBB Gross Value 0.1499554 0.1649509 0.1254328 0.1254328 0.2903837 1.4519185 Net Value 0.1274620 0.1402082 0.1066178 0.1066178 0.2468260 1.2341300 B) Considering the proposals in items (I), (II) and (III), the total amount proposed to be paid in interests on capital stock on July 29, 2005 is the gross amounts of R$275.8 million and R$135.0 million, and the net amounts of R$234.4 million and R$114.7million, respectively to Unibanco and Unibanco Holdings. Such values correspond to (I) complementary interest on capital paid related to the profit ascertained in the 2004 fiscal year of Unibanco Holding; (II) quarterly interest of Unibanco and Unibanco Holding related to the second quarter of 2005; and (III) complementary interest on capital paid related to the profit ascertained in the first semester of 2005 of Unibanco and Unibanco Holdings. Should the proposals described herein be approved, the shareholders of Unibanco and Unibanco Holdings shall have the right to receive the interest on capital stock in accordance with the gross and net amounts set forth in the table below. Such values correspond to one (1) share, one (1) Unit, or one (1) GDS, as the case may be. An income tax rate of fifteen percent (15%) will be withheld from such gross amounts, resulting in the net values set forth below: In R$ UBB-ON UBB-PN HOL-ON HOL-PN UNIT GDS UBBR3 UBBR4 UBHD3 UBHD6 UBBR11 NYSE-UBB Gross Value 0.1887789 0.2076568 0.1625328 0.1625328 0.3701896 1.8509480 Net Value 0.1604620 0.1765082 0.1381527 0.1381527 0.3146609 1.5733045 C) Should the proposals above be approved: In Brazil, July 15, 2005 will be considered as "Record Date" for the purpose of determining the holders of shares and Units who will be entitled to receive the proposed payment, on July 29, 2005. Unibanco's and Unibanco Holdings' shares and Units will be traded in the Brazilian market without the right to receive payment of interest on capital stock (ex-interest on capital stock) from July 18, 2005 on. In the United States of America, July 20, 2005 will be considered as "Record Date" for the purpose of determining the holders of GDS who will be entitled to receive the proposed payment. The GDSs will be traded without the right to receive payment of interest on capital stock (ex-interest on capital stock) from July 18, 2005 on. CONTACT: Unibanco - Uniao de Bancos Brasileiros S.A. Investor Relations Area Av. Eusebio Matoso, 891 - 15th floor Sao Paulo, SP 05423-901- Brazil Phone: (55 11) 3097-1980 Fax: (55 11) 3813-6182 E-mail: investor.relations@unibanco.com URL: www.ir.unibanco.com USIMINAS: Moody's Places Ratings on Review for Possible Upgrade --------------------------------------------------------------- Approximately USD 175 Million of Debt Affected Moody's Investors Service placed Thursday the debt ratings of Usinas Sider�rgicas de Minas Gerais S.A. -- USIMINAS ("Usiminas") and Companhia Sider�rgica Paulista -- COSIPA ("Cosipa") on review for possible upgrade. Ratings placed under review are as follows: - USD 175 million MTN issued by Cosipa, guaranteed by Usiminas: B1 (Foreign Currency) - USD 500 million Senior Unsecured Global MTN Program issued by Usiminas without guarantee from Cosipa: B2 (Foreign Currency) - USD 500 million Senior Unsecured Global MTN Program issued by Cosipa with the guarantee from Usiminas: B1 (Foreign Currency) The review is prompted by the overall improved capital structure of Usiminas on a consolidated basis as a result of the group's continuous deleverage, the improved debt maturity profile of its indebtedness and strengthened liquidity position. The review will focus on the group's ability to maintain its position as a low-cost producer on a continued basis and continue to report satisfactory operating margins even during downturn cycles. Following the conclusion in 2001 of its large investment program, and benefiting from improved market conditions for steel, Usiminas has used its higher free cash flow to reduce indebtedness consistently in the past years. Also, the group has successfully managed to improve its debt maturity profile by reducing the concentration of maturities in the short-term, which combined with the increased cash position has improved the group's liquidity position, which in turn has helped the group attain greater financial flexibility. The Usiminas group is the largest fully integrated flat steel manufacturer in Brazil and in Latin America. In 2004, Usiminas produced 9 million metric tons of crude steel using continuous casting technology, making it the largest producer of crude steel in Brazil. The Usiminas group, comprising mainly Usiminas and Cosipa, is one of the top twenty largest steel groups in the world. =================== C O S T A R I C A =================== ICE: Sacks Director for Alleged Irregularities ---------------------------------------------- Telecoms monopoly ICE sacked its director for public telephony, Willy Arnaez, after an investigation revealed that he committed irregularities in awarding ICE contracts and received payments for private consulting, says Business News Americas. ICE's investigation concluded that Mr. Arnaez had received CRC13 million (US$27,145) from public telephony provider Condicel for two private consulting projects Condicel wished to develop in Panama and Ecuador two years ago. Therefore, Mr. Arnaez breached his contract with ICE that prohibited him from working for other companies, the Company said. In addition, ICE also suspected that Arnaez had favored Condicel when it won a contract in 1998 to rent with an option to buy 15,000 public telephones. However, ICE was unable to prove its suspicion. Condicel currently has contracts with ICE worth US$19 million. Mr. Arnaez reportedly recommended the awarding of contracts last year to Condicel. ============= E C U A D O R ============= PACIFICTEL: Chairman Quits Post ------------------------------- Francisco Guzman has resigned from his post as chairman of state-run fixed-line operator Pacifictel, reports Business News Americas. Guzman, who has handled the post for only 47 days, said his resignation was due to personal problems and he was not pressured in any way. He will be replaced by Luis Vargas. State holding company Fondo de Solidaridad (FS), owner of Pacifictel, is expected to name a new board head. PETROECUADOR: President Recommends Restructuring ------------------------------------------------ State oil company Petroecuador needs at least US$900 million to a carry out a much-needed restructuring aimed at improving the Company's production, MarketWatch reports, citing company executive president Jorge Pareja Yanuzzelli. "If we had this US$900 million it would be easy to invest in improving production, refining, and all other activities," Mr. Yanuzzelli said. "We have arrived at a point where we have to decide if we are going to develop our petroleum industry, which is our main industry, or are we going to be resigned to losing it," he said. Mr.Yanuzzelli also revealed that the Energy Ministry will announce in the next few days a review of petroleum industry policies. Petroecuador has proven reserves totaling about 3.5 billion barrels of oil, and claims an infrastructure valued officially at $3.0 billion. Production at the state-owned company has been falling steadily. Ecuador produces about 197,000 barrels of oil a day. Petroecuador officials want to increase that to about 200,000 barrels a day by the end of the year. PETROECUADOR: President Denies Alleged State Indebtedness --------------------------------------------------------- Petroecuador President Carlos Pareja said he doesn't hold any outstanding debt with the state, reports Business News Americas. Mr. Pareja's comments came in response to allegations made by the country's anti-corruption commission (CCCC) that he owes the state US$34,000 related to a guarantee on a contract awarded in March 2002 by the Petroindustrial refining unit of Petroecuador led at that time by Pareja. "Neither at the time of taking up my position [as Petroecuador president] nor at this moment am I unable to carry out my duties as president of Petroecuador because to have outstanding debt would entail having missed payment deadlines, which is not the case," Mr. Pareja said. Mr. Pareja became Petroecuador's president on June 17. =============== H O N D U R A S =============== * HONDURAS: WB Approves $97M Loan For Poverty Reduction ------------------------------------------------------- The World Bank approved four Thursday zero-interest credits for a total of $97 million in support of Honduras' comprehensive poverty reduction strategy. The credits will fund four projects in the areas of urban development, rural infrastructure, nutrition and social safety nets for children and youth, and the modernization of judicial system. "These credits are part of our ongoing support to Honduras' Poverty Reduction Strategy," said Jane Armitage, the World Bank's Country Director for Central America. "The Bank is pleased to support programs that will improve living conditions for the urban poor; provide increased access to infrastructure for rural communities; improve opportunities for Honduras' children and disadvantaged youth; and assist the government in modernizing its judicial system." The US$15 million Barrio Ciudad Project will improve the quality of life for the urban poor and enable their municipal governments to continue and sustain such improvements through capacity building and improved access to credit. The project will finance urban services and infrastructure in intermediate to large-size cities; poverty-targeted urban neighborhood upgrading and development; municipal government strengthening; and urban crime and violence prevention schemes. The US$47 million Rural Infrastructure Project will support two of the six pillars of the Poverty Reduction Strategy by reducing rural poverty and promoting sustainability. The project will provide rural communities with access to improved infrastructure services (roads, water & sanitation and electricity) on a sustainable basis. The project will be implemented at the local level, working directly with the association of municipalities (mancomunidades), supporting the Government's decentralization objective. In the process, the project will enhance the capacity of the institutions, both local and central, to manage rural infrastructure. The US$20 million Nutrition and Social Protection Project will improve the nutritional and basic health status of pre-school Honduran children by expanding the successful AIN-C program--a low-cost, community-based program that prevents malnutrition by counseling mothers about appropriate child feeding and other child-rearing practices--and by piloting a First Employment program for disadvantaged youth. The coordinated implementation o f these interventions constitutes the first step towards consolidating the government's institutional and technical capacity to formulate, coordinate, and monitor a comprehensive social safety net. This objective supports government's strategy of fostering human capital investment among poor families in the poorest municipalities of the country to reduce poverty. The US$15 million Judicial Branch Modernization Technical Assistance Project will bring the Bank's knowledge and know-how in designing and implementing successful judicial reform strategies in Central America and elsewhere. The Project will improve the Judicial Branch performance, especially with respect to efficiency, transparency, and access. It will promote reform through an integrated and participatory manner involving all stakeholders-judges, court staff, users and civil society. Although time consuming, such a process pays real dividends in terms of better defining problems and priorities, identifying home-grown solutions and/or refinements, and promoting reform ownership, public legitimacy, and sustainability. All the credits, from the International Development Association (IDA), the World Bank's concessionary lending arm carry a 10- year grace period and a 20-year maturity period. CONTACT: World Bank Media Contacts Yanina Budkin Phone: 4316-9700 E-mail: ybudkin@worldbank.org Alejandra Viveros Phone: (202) 473-4306 E-mail: aviveros@worldbank.org URL: http://web.worldbank.org ============= J A M A I C A ============= AIR JAMAICA: Government, Opposition Compromise to Save Airline -------------------------------------------------------------- Government has approved the appointment of a joint select committee of Parliament to enquire into the money problems of Air Jamaica, The Jamaica Observer reports. The decision was made to gain the opposition's approval to an additional government support for the airline. The opposition earlier said that without an agreement to probe into Air Jamaica's financial loses, it will not approve government guarantees to secure loans totaling US$335 million (J$20.4 billion) to assist in the financial and operational restructuring of the airline. The guarantees cover the following: - US$200 million long term fixed rate private placement by Bear Stearns among institutional investors in the United States and Europe to, in part, refinance some of the short term debt of the ailing airline at 9.375 per cent interest; - US$125 million bond issue by RBTT Merchant Bank at 5.50% interest; and, - US$10 million National Commercial Bank(NCB) revolving bank facility at 4.7% interest. Minister of Finance and Planning Dr. Omar Davies said the government and the opposition would work together in defining the precise terms of reference for the committee, which will comprise members of both houses. Davies also promised to table the Sabre Report, as well as a draft business plan for the airline, after he has taken the documents to Cabinet. "It is imperative that transparency prevails. We have nothing to hide," he said. Refinancing is "absolutely necessary," said Davies, if Air Jamaica is to attract the kind of management that it needs to revive its fortunes. CONTACT: AIR JAMAICA Corporate Communications Tel: 876-922-3460 ext 4060-5 URL: www.airjamaica.com =========== M E X I C O =========== INNOVA: Moody's Upgrades Corporate Family Rating to Ba3 from B2 --------------------------------------------------------------- Moody's Investors Service has upgraded Innova, S. de R.L. de C.V's corporate family rating to Ba3 from B2 to reflect Innova's improved credit metrics as a result of the successful absorption of DirecTV's subscribers in Mexico as well as disciplined sales and cost management. The same change to Ba3 from B2 was made to the senior unsecured and long term issuer ratings for the Mexican corporate. The outlook on the ratings is now stable. The following issue was affected by Moody's upgrade: - US$300 million of 9.375 Senior Unsecured Notes due 2013 Innova's ratings upgrade is supported by its consistent growth in EBITDA and higher EBITDA margins (42.3% in 1Q05), which Moody's expects will convert, by FYE 2005, to free cash flow equal to 20% of total debt. The earnings growth reflects a growing subscriber base and very disciplined cost controls. In addition, the company has considerably extended its amortization profile through refinancing its 2007 debt maturity at a lower rate of interest. Innova has increased its share of the Mexican Pay-TV market, which reached approximately 25% at 1Q05 and maintained the company as # 1 Pay-TV operator and the only direct-to-home (DTH) provider in Mexico. Innova's competitive strength is a consequence of regular improvements in its operations and customer care as well as the satisfactory incorporation of ex- DirecTV subscribers to its network (a total of 140,000 subscribers with contracts of longer than six months expected for YE 2005), as Moody's anticipated in its in changing Innova's outlook to positive from stable in October 2004. The key to Innova's successful business model has been its strategic focus on exclusive and high quality content, further supported by a national coverage, exclusive programming, which includes popular reality shows, soccer games and some special events, and an improved customer service. In addition, the company has been putting extra attention on sales efforts and cost controls in the last years. Also supporting its rating is Innova's enhanced debt maturity profile with no substantial maturity until 2010 (approximately US$45 million) coupled with the bulk of its indebtedness (US$300 million) maturing in 2013. In addition, the company has reduced its exposure to dollar payment obligations to US$80 million via contractual foreign exchange caps with programmers, as well as by entering into currency swaps. The agency also took into consideration the continuous support from Innova's major shareholder, Televisa, as well as from NewsCorp. The ratings are however constrained by the company's relatively small size, uncertain long-term growth prospects, strong competition from cable companies, and absence of a back-up system to cover its exposure to PanAmSat, all of which have a clear potential impact on the company's financial performance. Innova has taken share from its cable television competitors in the last 18 months by offering stronger programming and more reliable service. Moody's expects the company will continue to progress as long as the system operators are a) fragmented and b) converting to digital from analog, with service disruptions. However, the agency remains concerned about the long term prospects for consolidation among cable systems, which would diminish Innova's competitive advantage. Stronger revenues and operating cash flow generation has allowed Innova to reduce its leverage. Since 2003, Innova has been able to fund its operating expenses and capex with internally generated cash instead of receiving additional funds from shareholders. Moody's expects the same in 2005, although the company is planning on capital expenditures of over US$110 million, which is approximately twice the amount spent annually in the last two years. The increased capex is justified by the migration of subscribers from DirecTV and the smart card change- over that the company is undertaking. The rating outlook is stable and incorporates the strength of Innova's market position as well as its ability to increase revenues and post growing free cash flows. Innova's ratings could experience upward pressure if the company posts free cash flow in amounts that reduce its leverage exposure, expressed by total debt to FCF lower than 3 times, and if it increases interest coverage, as per EBITDA to interest expense ratio, over 6.5 times with prospects of consistently maintaining minimum such levels in the foreseeable future thereafter. Also, an upgrade could be considered if the company uses internally generated cash to further reduce debt. Should the company not maintain stable subscriber growth through 2007, or suffer significant reductions in average revenue per user (ARPU), currently at approximately US$34, Moody's would expect deterioration in the credit metrics to follow and place pressure on the rating. The rating agency notes that subscriber growth is also vulnerable to an economic slowdown or any unexpected major operating problem that affects its operations or those of its sole supplier, PanAmSat, which may result in a downgrade of Innova's ratings. Innova, a Mexican provider of satellite TV services, is headquartered in Mexico City, Mexico. ================================= T R I N I D A D & T O B A G O ================================= BWIA: Prime Minister Discusses Murky Outlook -------------------------------------------- There is still no clear picture as to what BWIA's future would be, The Trinidad Express reports, citing Prime Minister Patrick Manning. Presently, the Cabinet is analyzing a report [on the airline's operations and the future for the airline] prepared by a group of prominent businessmen led by Arthur Lok Jack, who is known as a "master entrepreneur." Nevertheless, Mr. Manning warned that whatever option the government is going to take on BWIA, he said "it will not be cheap. "And what we would really like to see is one Caribbean airline," he said, noting what he said were the difficulties being experienced by the government of Jamaica with Air Jamaica and the government of the Bahamas with Bahamas Air. For Trinidad and Tobago, "there are no sacred cows, including BWIA," he said, adding that the question still remained "if BWIA survives." CONTACT: BRITISH WEST INDIES AIRWAYS (BWIA) Phone: + 868 627 2942 E-mail: mail@bwee.com Home Page: http://www.bwee.com *********** S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter - Latin America is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland USA. John D. Resnick, Edem Psamathe P. Alfeche and Sheryl Joy P. Olano, Editors. Copyright 2005. All rights reserved. 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